ISDA WGMR Implementation Initiative

In September 2013, the Working Group on Margin Requirements (WGMR), an initiative jointly run by the Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO), issued the final margin policy framework for non-cleared, bilateral derivatives. Individual regulatory authorities across jurisdictions have since started to develop their own margin rules consistent with the final framework.

ISDA initiated a WGMR Implementation Program to facilitate the implementation of the margin rules across jurisdictions.

SIMMA key component of the WGMR Implementation Program is the Standard Initial Margin Model (SIMM) project, which is focused on developing a common initial margin (IM) methodology that can be used by market participants globally. Unlike the calculation of variation margin, which is based on day-to-day valuation changes that are often directly observable, initial margin calculations very much depend on the choice of model and the assumptions used. Under the framework set by the WGMR, firms can use their own internal models to calculate initial margin, as long as they meet certain criteria and obtain regulatory approval. These models have the potential to differ significantly, raising the possibility that counterparties will arrive at a different initial margin figure for the same trade. The result would be a surge in the number of disputes – and no obvious way currently in place to quickly resolve them. The SIMM provides an open, transparent, standard methodology that will be available to all.

In addition to the SIMM workstream, several ISDA WGMR implementation workstreams were formed to address all areas necessary for broad market compliance with new rules for both IM and variation margin (VM), including portfolio integrity, collateral management process changes, data, dispute resolution, and new legal documentation to govern collateral and segregation relationships. The ISDA WGMR Oversight Committee coordinates the work of all the above workstreams.

In September 2013, the Working Group on Margin Requirements (WGMR), an initiative jointly run by the Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO), issued the final margin policy framework for non-cleared, bilateral derivatives. Individual regulatory authorities across jurisdictions have since started to develop their own margin rules consistent with the final framework.

ISDA initiated a WGMR Implementation Program to facilitate the implementation of the margin rules across jurisdictions.

SIMMA key component of the WGMR Implementation Program is the Standard Initial Margin Model (SIMM)TM project, which is focused on developing a common initial margin (IM) methodology that can be used by market participants globally. Unlike the calculation of variation margin, which is based on day-to-day valuation changes that are often directly observable, initial margin calculations very much depend on the choice of model and the assumptions used. Under the framework set by the WGMR, firms can use their own internal models to calculate initial margin, as long as they meet certain criteria and obtain regulatory approval. These models have the potential to differ significantly, raising the possibility that counterparties will arrive at a different initial margin figure for the same trade. The result would be a surge in the number of disputes – and no obvious way currently in place to quickly resolve them. The SIMM provides an open, transparent, standard methodology that will be available to all.

In addition to the SIMM workstream, several ISDA WGMR implementation workstreams were formed to address all areas necessary for broad market compliance with new rules for both IM and variation margin (VM), including portfolio integrity, collateral management process changes, data, dispute resolution, and new legal documentation to govern collateral and segregation relationships. The ISDA WGMR Oversight Committee coordinates the work of all the above workstreams.

Under the revised licensing program, any market participant will be able to license the ISDA SIMM™ to calculate initial margin for its own or its clients’ non-cleared derivatives transactions. Third-party vendors will also be able to license the ISDA SIMM™ for proprietary services or products. As part of the revised terms, an annual licensing fee will apply to all those who use the ISDA SIMM™. The licensing fees collected will cover annual maintenance and recalibration costs associated with the ISDA SIMM™ to ensure it continues to meet current and future regulatory standards. The licensing fee will be reviewed annually.

Please direct any questions regarding the ISDA SIMM™ licensing program to isdalegal@isda.org.

December 8, 2016

Video 3: How to Prepare for the VM Big Bang

Mark New, Senior Counsel for the Americas at ISDA, describes the tools available to help firms prepare for the variation margin requirements. Click here to view the third video

ISDA Amend 2.0 includes a new protocol to enable market participants adhere to the variation margin requirements under various legal jurisdictions. Following on from our overview of the Self-Disclosure Letter, the next step requires participants to amend Credit Support Annexes (CSAs) to address regulatory compliance. This joint webcast with Markit helps market participants prepare for the upcoming uncleared margins deadline.

November 28, 2016

Getting Ready for the March 1, 2017 Variation Margin Requirements: What Steps Do I Need to Take?

A list of steps prepared by ISDA on how to get ready for the March 1 variation margin deadline.

November 15, 2016

ISDA Announces New Head of Non-cleared Margin Initiative

Press Release

October 26, 2016

ISDA Amend Webcast: Are you prepared for the next wave of margin rules?

Jurisdictions around the world are implementing regulatory margin requirements for non-cleared derivative transactions. ISDA Amend 2.0 includes new functionality to allow market participants to exchange information to determine if their trading relationships are subject to margin requirements. This joint webcast with Markit helps market participants prepare for the upcoming regulatory deadlines. ISDA Amend Webcast: Are you ready for the margin rules?

September 1, 2016

Margin for Non-cleared Derivatives: ISDA Initiatives

The introduction of new margin requirements for non-cleared derivatives will transform how firms use derivatives, and will require significant changes to infrastructure, processes, models and documentation. ISDA has been working on a number of initiatives to help firms meet the rules.

August 11, 2016

ISDA Amend Webcast: Are you ready for the margin rules?

ISDA Amend 2.0 includes new functionality to allow market participants to implement the new margining requirements for non-cleared derivatives, as well as the ability to inform counterparties about elections they have made under the ISDA Resolution Stay Jurisdictional Modular Protocol (ISDA JMP). This joint webcast with Markit helps market participants prepare for the upcoming regulatory deadlines.
ISDA Amend Webcast: Are you ready for the margin rules?

ISDA Documents available for transactional use

ISDA Documents available non-transactional use

ISDA Documents available for educational/training-not intended for transactional use